Facebook Position Trading And Renko Chart Considerations

In this facebook position trading video, we are going to focus on:  (1) facebook stock and options trades from the 12/27 expiration through 1/8 – especially the status of the short in the money calls that continually needed trade protection (2) renko trading chart considerations and a discussion of market charting hours and 24 hour -vs- real time hour charts, along with the TradeStation -vs- NinjaTrader renko charts.

Facebook Trading Update 12/27 – 1/8

My facebook stock buy position was reversed to sell on 12/27, and closed with the following stock and option position:

• 12/26 sell 2 59c 1.00 – 1/10 expiration
• 12/26 buy 1 57p .80 – 1/3 expiration
• 12/27 sell facebook stock 57.00

And with a 55.44 close on 12/27, short 56 call that had been in the money and needed long stock protection, expired worthless.

Additionally, the long 57 put turned a 1/3 short 53.5 put into a ratio short spread at a 1.00 credit, with a breakeven point at 49.00 – and with the short facebook stock, was a covered position.

The options position trading math for the ratio short spread:

• 57 – 53.5 = 3.50 spread with
• Ratio put short credit 1.00 is added to the 3.50 spread width = 4.50
• Subtract the spread with and credit from the short strike = 53.50 – 4.50 = 49.00 break even
  • But closed short put for profit at .10
  • Makes the 57p long again with the short 59c as synthetic short protection for the long stock

 12/30 Trading Day

• 53.43-53.62 double bottom
  • Sell 2 1/10 52.5p .86 – buy 1 1/3 54.5c .63
  • Offset diagonal expirations
  • Completes put and call ratio shorts
    • -2 59c 1.00 +1 54.5c .63 = 1.37 credit
      • 4.5 spread width + 1.37 + 59 short strike = 64.87 breakeven
• +1 57p .80 -2 52.5p .86 = .92 credit
  • 4.5 spread width + .92 credit – 52.5 short strike = 47.08 breakeven

1/3 Trading Day

• 60 minute chart reverses into buy mode – but on open gap and inside of consolidation
• No buy setup and short held
• 54.5c  expired so the 59c in ratio uncovered
  • Close was 54.56 – .63 call had been closed .75

1/6 Trading Day

• 2 purple square higher low double bottom
  • Buy 1/10 55c .85 to replace the call lost on the 1/3 expiration
  • There is then a short put-long call options synthetic protecting the trailing shorts
  • Yellow circle and renko synch – I will discuss this in a moment

Renko Trading Charts Consideration

Before discussing the renko chart buy, I am going to show you 2 renko charts – look for the differences and the trading decisions that they may lead to.

     

Did you see what I was talking about – you were looking at the following charts:

• TradeStation extended hours chart
• NinjaTrader real time hour chart

The extended hours chart shows a buy setup and a sell setup that would have been entered outside of real time hours – look at the yellow circles.  And the right side of the chart is a mix of renko bricks from 1/3 and 1/6, both real and extended hours – and in this case I think they mask a trade setup.

Note:  If I had shown you a tradestation real time chart, you would only have real time bricks – but the chart wouldn’t show the gaps, like the NinjaTrader chart does.

I have been using NinjaTrader a lot since we added the renko trading strategies, and even got real time data for it, instead of trying to use interactive brokers.  I have to say that I am really liking the program and plan to use it as a trading platform for some of my trades.

We see gaps on the market hours bar charts.  And I want to see the gaps on our renko charts, along with being able to see any related trade setups.

So, what are we going to do?

I want both the extended hour and real time hour renko charts – I have always wanted to see the after hours prices, especially if there has been news released, either for the specific underlying or news that is market related.

This will be easy to do for NinjaTrader users.  For tradestation users, still make both charts and be sure to mark the areas where there should be a gap.   And if you are trading profitably, you could consider getting some real time data to use with NinjaTrader – or maybe you are using a broker that gives you real time and historical tick data.

I don’t think this should be looked at as confusion –vs- gaining more information and clarity about what is happening.

And there is certainly no rule about not trading before the stock market opens.  Again, it might be news related, but it could also be a trade to protect a short option, or on an underlying that has sensitivity to other hours – or it just might be a really good trade setup and you can see that there is good enough volume and tight enough bid-ask spreads to trade.

1/6 NinjaTrader Renko Trading Chart

• Resume buy – this is the yellow circle you saw on the 60 minute chart
• Close the long 57p 2.32 for a profit – it had been bought at .80
• Reverse out of short at 55.03

1/8 60 Minute Position Trading Chart

Here is the 1/8 60 minute chart and there is nothing that would allow an addon, regardless of the renko chart – quite the contrary:

• Momentum extreme and mex cross at yellow circle-yellow square on chart
• This is read as being into a pmd and a test of left side resistance
• I haven’t done the trade yet, but there is a lot that I am thinking about doing
  • Selling the 55c to close and/or selling calls against it and long stock
  • Buy a put for long stock protection – and if the calls are sold it will be synthetic short protection
  • Similar to the synthetic long protection before the short stock was reversed

This will end this video.  From this price point and the falling momentum, I will especially be looking for the price momentum divergence high and a crown pattern, or a lower high move down from the last bar on the chart.

And I will be looking for a renko chart price envelope reverse and/or sell setup – these are all price moves that will make the decisions for the options trades that I just discussed.